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Amid souring confidence, tough policy choices loom

By Tom Hudson, Miami Herald
Published: December 10, 2018, 6:04am

From Beijing to London to Washington and Wall Street, suspicion is the new conviction.

Investors are wary after a brutal two months. They’re skeptical of presidential pronouncements regarding the trade war with China. They’re unconvinced the U.K.’s exit from the EU will be smooth and orderly. And they’re anxious over a Federal Reserve seemingly determined to continue to raise interest rates.

The investment markets aren’t just jittery. They are downright spooked. U.S. stock indices saw their steepest drop in months. European stock markets hit two-year lows.

That was just last week.

In the week ahead, the U.K. parliament is due to vote on a controversial plan to exit the European Union. It isn’t expected to pass when it votes Tuesday, threatening the already messy process into devolved into economic chaos. The U.K. economy has slowed to a trickle this year and on Tuesday employment data may show the U.K. jobless rate ticking up.

President Donald Trump’s erratic talk and tweets over trade with China have been unnerving for the markets. Between his “I am a Tariff Man” declaration and his claim that China “agreed to start ‘immediately’ buying U.S. products,” investors, already accustomed to fitful presidential outbursts, are voting by selling before refreshing their Twitter feeds.

Meantime, the Federal Reserve will be silent in the coming week. The central bank is preparing for its last interest rate-setting meeting of the year. Leading up to the decision, the agency has given little indication that it won’t act by hiking its target interest rate. At its November meeting, most Fed officials believed a rate hike was “likely to be warranted fairly soon,” assuming the job market remained strong (it does) and inflation remains stable (it has).

The week ahead holds no quarter for investor confidence.

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